Chapter 7

The agile supply chain

Content

1. The concept of agility

2. Agile practices
The concept of Agility
 Key issue

What are the dimensions

1 of the agile supply chain?
 The concept of Agility

 Market sensitive
 Supply chain is capable
of reading and
responding to real
demand
 Virtual
 Information-based
supply chain, rather
than inventory-based.
Agile supply chain
 The concept of Agility
 Network based
 EDI and internet enable
partners in the supply
chain to act upon the real
demand
 Process integration
 Collaborative working
between buyers and
suppliers, joint product
development, common
systems and shared
information Agile supply chain
 The concept of Agility
 Demand characteristics and supply
capabilities

end-customers Lean supply chain 1980’s Efficiency, cost

become more
Focus
knowledgeable
about product Agile supply chain 1990’s Responsiveness
 The concept of Agility
 Demand characteristics and supply capabilities
Distinguishing Lean supply Agile supply
attributes
Typical products Commodities Fashion goods
Marketplace demand Predictable Volatile
Product variety Low High
Product life cycle Long Short
Customer drivers Cost Availability
Profit margin Low High
Dominant costs Physical costs Marketability costs
Stockout penalties Long-term contractual Immediate and volatile
Purchasing policy Buy materials Assign capacity
Information enrichment Highly desirable Obligatory
Forecasting mechanism Algorithmic(基于算法) Consultative(基于咨询)
 The concept of Agility
Comparison of characteristics of lean and agile supply
Characteristic Lean Agile
Logistics focus Eliminate waste Customers and markets
Partnerships Long-term, stable Fluid clusters
Measure capabilities,
Output measure such as
Key measure and focus on customer
productivity and cost
satisfaction
Work standardization, Focus on operator self-
Process focus conformance to management to
standards maximize autonomy
Logistics planning Stable, fixed period Instantaneous response
 The concept of Agility

Source: Mason-Jones, Naylor and Towill (2000), Engineering the

leagile supply chain
 The concept of Agility
Supply
characteristics
Plan and Hold inventory:
Long lead time
control hedge and deploy

React and
JIT: pull execute: agile
Short lead time
scheduling capabilities Demand
Predictable Unpredictable characteristics
market markets
 The concept of Agility
 Application of leagility: separation of ‘base’
and ‘surge’ demands
 Application of leagility: the Pareto curve approach

Source: Martin, Christopher and Denis Towill, An integrated model

for the design of agile supply chains
 Application of leagility: the de-coupling point
approach
 The concept of Agility

 Preconditions for successful agile practice

 Enterprise-level reality check
 Cost of complexity sanity check
 Lowering the cost of complexity: avoiding
overly expensive agility
 Forecasting: reduce the need for last minutes
crises
 External: demand forecast
 Internal: financial forecast, asset forecast
Content

1. The concept of agility

2. Agile practices
Agile practices
 Key issue

How can we use agile practices

1 to benefit from turbulence in the
marketplace?
 Agile practices
 Three characteristics of supply chain
operations related to agile
 Mastering and benefiting from variation in
demand;
 Very fast response to market opportunities;
 Unique or low volume response.
 Agile practices
 Benefiting from variance
 Three sources of demand uncertainty
 Seasonality
Demand variance

Time
 Product life cycles
 End-customer demand
 Agile practices
 Benefiting from variance
 Three sources of demand uncertainty
 Seasonality
 Product life cycles
Organize Adjust
Volume Agile capability
is needed

Start up Micro-markets
variety
 End-customer demand
 Agile practices

 Benefiting from short time windows

 Decreased D-time requires different levels of
agility (VMI & QR)
 Speed of replenishment
 Upstream time sensitivity
 Information dissemination and alignment
 Agile practices
 Benefiting from small volume
 Small volume is a result of micro-markets,
customization and rapid responsiveness.
 Three approaches of agile strategy related to
small volume
 Changeover flexibility
 Modularity at the network level
 Service-based and information-based solutions
 Agile practices
 Benefiting from small volume
Variety
decrease Mass production

Flexibility

Modular supply network

Craft production
Volume
decrease
An integrated model for enabling the Agile supply chain